Tharaman Shanmugaratnam – the chief minister of the Monetary Authority of Singapore (MAS) – says the regulator may restrict retail investment in the crypto sector through new consumer protection safeguards. These may include the limitations of leveraged trading – a trading strategy that has led to the collapse of many crypto traders and firms in recent weeks.
Crypto: Unfit for Retail
The minister’s statement on Monday was in response to Murali Pillai, an MP representing Singapore’s right-wing People’s Action Party. The politician asked whether MAS plans to impose more restrictions on crypto trading platforms to protect “sophisticated individuals” from entering “highly risky” crypto trades.
The minister reiterated MAS’s view that cryptocurrencies are “not a suitable investment for the retail public”, due to their exceptional price volatility. “Recent events clearly demonstrate the risks, with the prices of many cryptocurrencies falling sharply,” he added.
Last month, bitcoin and other cryptocurrencies fell unseen since the top of the crypto market in 2017. Market panic was largely driven by the ongoing threat of hawkish central bank policy, with rising inflation only prompting the Fed to accelerate its interest rate hikes.
With the collapse of Terra in May, the crumbling market has begun a domino effect of failing crypto institutions struggling to remain solvent. Several trading and lending platforms, such as Celsius, have been forced to freeze customer withdrawals as they fight to pay off crypto-collateralized loans.
With similar developments in mind, MAS is now considering both “retail participation limits” and “rules on the use of leverage” when trading cryptocurrencies. However, given the borderless nature of the asset class, it recognizes that global cooperation and coordination will be required for such sanctions to take effect.
“People could lose most of the money they invest, or more if they borrow to buy cryptocurrencies,” the MAS minister concluded.
Singapore’s regulatory progress
In January, MAS banned public advertising of cryptocurrencies, seeking to “trivialize” its risks. It was one of several jurisdictions to extend their anti-money laundering and terrorist financing measures to apply to digital assets in April.
That said, the authority has clearly stated that it has no intention of imposing any broad restrictions on crypto transactions. In an interview last year, MAS’s managing director acknowledged that crypto “can produce great results for the economy and society.”
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